Should insurers have to pay more pandemic relief to drivers?

TRENTON — Some state legislators are eager to undertake a full review of New Jersey’s auto insurers and whether they should be compelled to reduce rates nearly a year into a public health emergency that has changed driving patterns of state residents.

Last spring, auto insurers provided $551 million in relief to customers at the height of the pandemic’s stay-at-home directives, according to Department of Banking and Insurance data. That amounted to an estimated 27% of the premiums paid between April and June.

The DOBI directive issued last May requiring the relief due to “misclassifications of risk resulting from the COVID-19 pandemic” said the refunds or other adjustments were ordered “for each month that the public health emergency is in effect.”

Assemblywoman Joann Downey, D-Monmouth said insurance companies are “making lots of money,” pointing to Progressive Insurance’s 81% increase in profits between the second and third quarters of 2020. She said Progressive doubled dividends for shareholders but gave little to policyholders.

“I really want to see, now that we’re 10 months into it, to see where they are and what they’ve really been giving back vs. what they really could be doing to help everyone out there because God knows we all need that help,” Downey said.

“Generally, we, I think, stopped premium credits and refunds in May. Isn’t that correct?” Downey said at a recent Assembly Financial Institutions and Insurance Committee hearing.

“May and June, I think, yeah,” said Gary La Spisa, vice president of the Insurance Council of New Jersey.

Christine O’Brien, president of the Insurance Council of New Jersey, said insurers began premium reductions and moratoriums on cancelations and non-renewals on their own for “more than 97% of New Jersey drivers” before regulators took action last May.

“We do not believe that another order by DOBI requiring an across-the-board rate relief is necessary,” O’Brien said.

“I do think that the companies have – and not just in Jersey – but they have done enough on their own,” she said.

La Spisa said insurers have helped drivers in other ways, too, such as relaxing exclusions that would ordinarily restrict them from making deliveries for restaurants on their personal insurance policies.

But he said companies are cautious about further refunds and dividends because that although the overall number of accidents is down, those that are happening are more severe. Litigation connected to those cases is on hold because of disruptions in civil courts, but money is being kept in reserve for now.

La Spisa said studies have found drivers are speeding on less congested roads, which contributed to a nearly 6% increase in traffic deaths last year in New Jersey despite a decrease in miles driven.

“While we have seen a reduction in frequency of accidents, we are seeing a startling increase in severity,” La Spisa said. “And while companies are doing their best to adjust to new driving patterns, we are being very cautious as we hope that some of these driving behaviors return to normal so we can see some of these numbers go down.”

Assemblyman Joe Danielsen, D-Somerset, said the Legislature should launch a full review of the auto insurance industry in New Jersey. He said his family’s rate return during the pandemic was 0.8% during the pandemic, with no losses and a 70% drop in driving. He said constituents tell him the same.

“I don’t want the auto insurance industry to begin this message of charity and give back,” Danielsen said. “I don’t see it. Though I appreciate there are some losses out there, I also drive on the roads and I see it’s not nearly the amount of traffic and congestion there was two years ago.”

Assemblyman Bob Auth, R-Bergen, who is an insurance broker, said auto insurers he deals with have told him they are preparing 15% rate reductions to make up for a loss of business.

“I know sometimes it’s good to pile on the insurance companies, and I’m not saying they’re angels – believe me, I deal with them every day – but they seem to be in a mode, if it’s not for keeping a client, it’s for self-preservation,” Auth said.

La Spisa said rate reductions are possible in the coming year.

“As we get to renewal now, many companies have instituted downward adjustments on their premiums of between 5% and 15% as they try to adjust for changes in driving behavior,” he said. “As driving has returned more to normal – though the patterns are different, mileage is getting closer to normal – companies are now trying to assess how that is going to impact premiums going forward.”

O’Brien said DOBI regulators have been pushing insurers to provide drivers more financial relief.

“The department has been very clear about trying to encourage the companies to look at only submitting rate-neutral filings,” O’Brien said. “Of course, that’s not always possible.”

“If we have this conversation again in another six months, I hope I’m able to tell you that there isn’t a plan to spike premiums through the roof,” she said, “but I can’t answer that accurately now.”

Michael Symons is State House bureau chief for New Jersey 101.5. Contact him at michael.symons@townsquaremedia.com.